OPEC's Friday numbers game

So here we are back again at Helferstorferstrasse 17 on Friday (December 7), for another packed room at the "5th OPEC and non-OPEC Ministerial Meeting." That's after having received no formal announcement on the level of OPEC cuts overnight at the "conclusion" of the 175th OPEC Ministers Meeting, and Saudi Oil Minister Khalid Al-Falih having told CNN a deal on a production cut may not materialise. 

The morning after extreme volatility in the oil markets, OPEC's numbers game continues. The latest that multiple sources seem to suggest is that OPEC is inclined to cut 650,000 barrels per day (bpd), and non-OPEC countries another 350,000 barrels per day, all tallying up to a possible 1 million bpd cut proposed overnight. 

Question is - will the market be convinced, especially if Iran and a few smaller members decline to participate? The Oilholic doesn't think so (and Iran continues to play hardball and the formal OPEC /non-OPEC meeting has not even begun yet @12:46 GMT). 

To support a $70 oil price, a 1 million bpd cut won't do, but may serve to de-risk a huge decline. Anything above that appears unlikely. We wait and see! More from Vienna soon. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2018. Photo: OPEC Media Briefing room, Vienna, Austria, December 2018 © Gaurav Sharma 2018

Just boring variation not a crude rally or slump

Week-on-week, the picture remains one of a crude oil market in which benchmark prices are firming up, yet both Brent and WTI futures remain within that very predictable range of $60-80 per barrel (see chart left, click to enlarge). 

A fortnight ago, bolstered largely by the tightening of US sanctions on Iran or rather the perception of tightening, Brent began a two-week climb towards $80 per barrel, as the WTI strengthened above $70. 

Yet again, bullish prophets hit the airwaves suggesting a $90 per barrel Brent price in light of tightening of a crude market with "very little spare capacity." In some market quarters it is being debated that global spare capacity is now less than 1 million barrels per day (bpd). 

The Oilholic thinks the bulls ought to calm down a bit. Agreed, US President Donald Trump's squeeze on Iranian oil exports is making buyers nervous, particularly India and Japan. And in 2019, it would be reasonable to expect Tehran's production to be well below its current 3.6 million bpd+ production mark to around 2.4 million bpd. 

However, Saudi attempts to compensate (or over-compensate) for a decline in Iranian output would not go unnoticed in Moscow. Russia has already indicated that it would like to raise production, and amicable as things might be with OPEC, if they want to, they would increase production. 

The market's problem right now is that it is missing strong breakout factors - both bearish and bullish ones. Bearish threats of global trade wars, direction of emerging markets, and an unraveling of the OPEC and non-OPEC agreement continue to lurk around. Similarly, bullish factors such as the industry under-investing (a very visible concern) and running out of spare capacity to mitigate supply shocks also persist. 

So price positive as well as negative sentiments are still not strong enough to decisively pull oil futures one way or another, with US turning less and less to the global supply pool courtesy of rising domestic production. Therefore smart money says what we've seen over the last two weeks was not a rally and nor has there been any noticeable slump. All that has transpired is variation within a predictable floor and ceiling. That's all for the moment folks! Keep reading, keep it 'crude'!

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© Gaurav Sharma 2018. Graph: © Gaurav Sharma, September 2018.

Feeling the crude temperature ahead of OPEC 173

The Oilholic has arrived in Vienna, Austria to gauge the crude temperature ahead of the 173rd meeting of OPEC ministers.

Going by the events of the last 24 hours, looks like the Russians, in town leading the 10 non-OPEC producers, seem to be giving the most briefings, and mostly to Russian journalists and analysts.

You could be forgiven for thinking they'd joined OPEC; but the Kremlin's message to analysts and scribes alike seems to be a simple one - the current production cut agreement reached in concert with OPEC producers for taking out 1.8 million barrels per day (bpd) out of the market is valid until March 2018, so why tamper with it now? 

On the other hand the few odd soundbites coming out of OPEC seem to "express hope" the cut agreement, of which the cartel has a lion's share of 1.3 million bpd, is rolled over for a further nine months. With both parties not appearing to be on the same page, oil futures are sliding. 

At 7:45pm GMT, Brent is down 0.53% or 34 cents to $63.27 per barrel, while WTI is down 1.09% or 63 cents to $57.36 per barrel, making it a second successive session of intraday declines extending from European hours to US trading hours.

Expect more of the same, though OPEC's problem is the lack of an exit strategy, which is why some in its ranks want to kick the can down the road even if the Russians aren't keen. Meanwhile, since its been over 10 years of covering OPEC by the Oilholic, here's a look back at the last ten years for IBTimes UK. A whole lot memories, episodes and experiences to narrate. 

Finally, here is one's take on what to expect on IG Markets TV and Core Finance TV. 

And that's all from Vienna, for the moment folks! Plenty more to follow. In the meantime, keep reading, keep it crude!

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© Gaurav Sharma 2017. Photo: OPEC signage outside its secretariat in Vienna, Austria © Gaurav Sharma. 

No surprises! OPEC & non-OPEC cuts rolled over for 9 months

If you were secretly hoping for a surprise at the 172nd OPEC ministers' meeting, consider your hopes dashed, as things went perfectly according to script.

Except of course Equatorial Guinea became the 14th member of OPEC out of the blue, and with little prior intimation to half of the world's press. 

That meant 24 oil producers - including 10 non-OPEC nations led by Russia, and 14 OPEC participants headed by kingpin Saudi Arabia - rolled over their 1.8 million barrels per day (bpd) output cut to March 2018. 

Libya and Nigeria were exempt, Iran will be given some leeway, and Russia reaffirmed it was sticking to its 300,000 bpd pledge; the largest non-OPEC output cut of its kind on paper. (Here's the full IBTimes UK report). 

Big question is where from here? If Saudi Oil Minister Khalid Al-Falih is to be believed, this is all about rebalancing the market back to its five-year average. Problem here is that a buffer producer in the shape of the US keeps plugging away with some predicting its output to touch 10 million bpd in 2018. 

Were that to be the case, is OPEC not in effect subsidising shale players? Thrice yours truly asked Al-Falih whether that was the case, and thrice the question was ignored. The Oilholic is not convinced the extension of this cut would provide short-term support to the oil price that some are hoping for. 

In fact the initial response of the market has been something of a mini selloff, as many were hoping the cuts would either be deepened or be extended by 12 months. Nether happened, but the market got plenty of food for thought. That's all from Vienna in this instance folks. More when the Oilholic can make a more considered assessment and has gathered his thoughts. Till then, keep reading, keep it crude!

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© Gaurav Sharma 2017. Exterior of OPEC Secretariat, Vienna, Austria © Gaurav Sharma 2017.